Central Suffolk Office Submarket: Mid-Year 2024 Analysis

As we enter the second half of 2024, the Central Suffolk office submarket continues to face challenges with demand, but signs of recovery are on the horizon. Here’s a detailed look at the key trends and statistics shaping this market.

Weak Demand Continues but Shows Signs of Improvement

The Central Suffolk office submarket has been grappling with weak demand since the second half of 2023. The first six months of 2024 recorded a net absorption of nearly -35,000 square feet (SF), following a dismal -97,000 SF in the latter half of 2023. Significant move-outs from a medical office in Garden City (-30,000 SF) and RXR Plaza in Uniondale (-23,000 SF) have notably impacted these figures.

However, there is a glimmer of hope as space demand begins to stabilize. Early July data for Q3 2024 shows a positive absorption of almost 7,000 SF, and this upward trend is expected to continue over the next few quarters.

Encouraging Leasing Activity

Leasing volume started strong in 2024, signaling potential for future occupancy growth. In Q1 2024, total leasing volume, which includes new lease commitments and renewals, reached 64,000 SF, nearly tripling the volume of late 2023. This is a promising indicator of improved market activity moving forward.

Submarket Characteristics and Inventory

Central Suffolk is a midsized office submarket with an inventory of 10.8 million SF. The typical office footprint is 9,400 SF, which is 36% smaller than the average in the broader Long Island metro area. Key office stock concentrations are located in Holtsville, Ronkonkoma, Patchogue, and Bohemia, primarily along routes 347 and 454.

Currently, new construction is minimal, with only 70,000 SF underway, representing a mere 0.6% of existing inventory. This limited construction activity should help alleviate some of the pressure on occupancies due to overall weak demand.

Affordability and Rent Trends

Central Suffolk boasts the most affordable office rents on Long Island. At $28.00/SF, market rents here are roughly $6/SF lower than the broader metro area. However, annual rent growth has been on a decline since peaking at nearly 7% in mid-2021. As of July 2024, rent growth stands at 2.8% and is expected to approach negative territory by year-end. This trend points to a tenant-friendly leasing environment, with concessions and rent discounts becoming more common to attract tenants.

Key Market Indicators

  • Current Market Asking Rent: $28.08/SF
  • Vacancy Rate: 7.2%
  • 12-Month Net Absorption: -21,301 SF
  • 12-Month Deliveries: 0 SF
  • Under Construction: 69,900 SF

Future Outlook

While the Central Suffolk office submarket has faced significant challenges, the positive absorption in Q3 2024 and strong leasing activity in early 2024 suggest a potential turnaround. Continued monitoring of these trends will be crucial to understanding the long-term trajectory of this market.

Stay tuned for more updates and detailed analyses of the Central Suffolk office submarket as we track its progress through the remainder of 2024.

Data and information provided by CoStar.